Salient to Investors:

Latin America is disappointing investors, economists and businesses with slower-than-forecast growth as waning commodity prices and strong currencies hit nations that failed to diversify and become more competitive.

Economists cut Brazil’s 2013 outlook for the second time in 7 days, forecasting the worst 3-year period in a decade.

The region has invested too little of windfall revenue in roads, technology and education, and to promote businesses outside of mining and agriculture. Chile has the region’s best OECD reading-skills results but is ranked 44 among 65 countries, with Peru second-to-last.

Brazil, Mexico, Colombia, Chile and Peru increased primary exports to an average 71.3 percent of foreign sales from 58.3 percent in the decade through 2011, instead of reducing vulnerabilities to commodity boom-and-bust cycles. SA Commodities said 212 vessels awaited cargo in Brazil during March, and the line of trucks to unload soybeans at its busiest port surged to a record 15 miles long.

Alberto Ramos at Goldman Sachs said the easy growth has been collected, and they need to find domestic sources of growth, rather than relying on abundant external liquidity and high commodity prices.

James Gaul at Boston Advisors is more cautious on the region than several years ago, driven by this decline in the global, commodity-led growth theme.

Analysts predict the region will grow 3.38 percent in 2013 versus predicting 3.81 percent 6 months ago, and Asia to accelerate to 6.44 percent.

Alonso Cervera at Credit Suisse said Mexican results in general have disappointed, and Q1 confirmed that Mexico is still dependent on a healthy rest of the world.

The IMF said Latin America will not sustain growth at current levels, given labor constraints and recent trends for capital and productivity increases, and potential growth through 2017 is closer to 3.25 percent versus 4 percent average a year in the decade through 2012.

The World Bank said Brazilian companies spend 2,600 hours a year dealing with tax issues compared with 209 hours in the East Asia and Pacific region.

Henry Stipp at Threadneedle Asset Mgmt said lower commodity prices may help cut inflationary pressure and give central banks more room for monetary stimulus.

Economists have cut Columbia’s 2013 growth forecast to 4.2 percent versus 4.9 percent last August.

Michael Shaoul at Marketfield Asset Mgmt said Latin America has not yet bottomed and will not recover to the growth level of the previous decade because the commodity boom is over and policy makers failed to reduce their dependence on primary goods when money flowed into their economies.

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